Here’s what the Czech Sphinx is planning for Royal Mail

The ‘Czech Sphinx’ billionaire vying for a takeover of International Distribution Services (IDS), the parent company of Royal Mail, has released a document confirming his “intentions and commitments” for the firm if his £3.6bn bid is successful at a shareholder vote in September.

In May, the board of IDS said it was “minded” to accept Daniel Křetínský’s £3.6bn offer to buy the firm via his EP Group.

Today, EP Group has released a “clarification” of its plans for the Universal Service Obligation (USO), which mandates the rules for Royal Mail’s service, and of its strategic direction intended for the company, which also owns the parcel business GLS.

EP Group has expressed full support for Royal Mail’s proposal for USO reform and has pledged not to propose any alternative until Ofcom completes its consultation process.

It will offer “legally binding” commitments to the UK government, ensuring Royal Mail remains the Universal Service Provider for five years post-acquisition.

In January, Ofcom called for a “national debate” on the future of the UK’s postal service. Letter volumes have halved since 2011, whilst Royal Mail’s obligations have not. The communications watchdog said Royal Mail risked becoming “financially and operating unsustainable in the long term.”

Any changes to the USO must be approved by the British government.

It comes after Křetínský reaffirmed his commitment to the USO in an interview earlier this week, pledging to maintain its ‘one-price-goes-anywhere’ service and first-class letter delivery six days a week.

He also went one step further than the formal written commitment. When asked if he would walk away from the USO, Kretinsky told the BBC, “As long as I’m alive, I completely exclude this”.

Plans for GLS

The EP Group has no current plans to divest General Logistics Systems (GLS), the more successful arm of IDS. However, it said both Royal Mail and GLS “require additional investment” in the mid-term and its main goal is to transform IDS into “one of the leading postal logistics groups in Europe.”

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As part of this commitment, EP Group will offer a legally binding guarantee that there will be no change in control of GLS or Royal Mail for three years following the acquisition.

The formal confirmation of Křetínský’s plans comes as IDS posted unexpectedly positive results this morning. Revenue at IDS rose by 8.2 per cent in the three months ended June 31 to £3.3bn, up from £3bn in the same period last year.

At Royal Mail specifically, revenue was up 10.6 per cent, from £1.8bn to £2bn, as it delivered more postal votes than in any previous election and as service levels picked up.

“There are finally signs of a positive turnaround at Royal Mail,” said Dan Coatsworth, investment analyst at AJ Bell. “Importantly, Royal Mail seems to be coping well in a highly competitive market and an uncertain economic backdrop.”

However he said the fact IDS’ board is recommending that shareholders accept Křetínský’s bid “doesn’t instil too much confidence in the business being worth a lot more simply as a result of organic achievements.”

The UK government also has to approve the foreign takeover of the 500-year-old national institution. In its manifesto for the general election, the Labour Party said it would “ensure that any proposed takeover is robustly scrutinised and that appropriate guarantees are forthcoming that protect the interests of the workforce, customers and the United Kingdom”.